MARKET RELEASE

Xero finishes year up 83% to $70m

4 April 2014

(Note: all currency is in New Zealand dollars and results are unaudited)

Xero Limited (XRO) announces operating revenue of $70.1m for the year ended 31 March 2014, up 83% from last year’s $38.4m result.

With monthly committed subscriptions growing to $7.8m, the recurring revenue model means that Xero commences its 2015 financial year strongly with $93m in annualised subscriptions (representing an 81% increase on the $51.5m reported at the same time last year).

The net loss after tax for the second half of the year ending 31 March 2014 is anticipated to be similar to that reported for the first half resulting in a full year loss of approximately $35m, compared to $14.4m last year. Xero has expanded its team to 758 employees and has $210m of cash to fund its growth.

The strong New Zealand dollar adversely impacts reported operating revenue given 66% of this revenue is denominated in foreign currencies. On a constant currency basis Xero grew operating revenue by 92% in the period.

FY14 commentary

Recruiting senior management for growth and filling out global teams was a key focus for the 2014 financial year as Xero added a further 376 employees.

Xero is now the leading accounting software provider in New Zealand and the leading online accounting software in Australia and the United Kingdom, with annualised subscriptions of $29m, $41m and $14m respectively.

With strong growth expected to continue in these markets, Xero turns its focus on the important US market. The US market entry phase was completed successfully, allowing Xero to raise an additional $180m of capital in October 2013, bolstering the Board with appointments of New York-based Chris Liddell as Chairman and San Francisco-based Director Bill Veghte and appointing Peter Karpas as CEO North America.

Nice work. Love how the nz herald sums up the year’s achievements with “Xero loss doubles” headline as if you raised $200 million to sit in the bank.
Only 361 days left to get to half a million customers. Go hard. Every year I think you have a near impossible task ahead and you manage to pull it off. Congratulations.

One analyst doubting the result for cracking the USA? If these figures are doubtful then it just goes to say that you eat an elephant or a monster in the name of INTUIT one bite at a time.
Once again, CONGRATS to all Xero employees in making “this beautiful accounting” more handsome every passing year.
And of course, we are confident too Rod.
Thanks.

@Richardo. We haven’t put out targets into the market but as we get into the year we’ll set expectations as to likely revenue for FY15. We should shortly be on $100m run rate so expect to pass that milestone this year which is a big one for us.

@Jason about half of our customers are first time into accounting software so well designed cloud solutions are growing the market

@Romeo we feel like we’ve delivered on all our promises in 8 years. We’ve had the discipline to ensure UK and AU growth is assured and we can now turn our guns on the US market. Our market entry has gone well and we’ve gained enormous insights.

We have a great competitor there but we think we have the best people, product and sufficient resources to make a dent. We understand that a focus of the business for FY15 will be to show US traction and feel confident we’ll do that this year.

This year we’ve substantially grown our team. That’s a huge amount of work. But we have so much more capability now.

@RodDrury
Congratulations. Love everything Xero! Your long term plan is sound and working. You’ve created the right brand, you have recruited great people and you’ve got an almost cult following. ???? I will be following Xero for a long time to come.

Mate need to to create a fully integrated ERP. Love to see the NZ team crush the big boys! perhaps then we can back the next americas cup? Give us a yell if you need more number gurus!

Looking at the stats ARPU shows a slight growth about 1%? but given the roll out of soultions assume that its better to rely on the pro-forma basis? Being in a strong cash postion would be good to see this being used to acquire a mature market customer base to grow the brand.

All the best with the investors, give the high market-cap its hard call between managing the short term expectations and longterm net profit.

Hi Rod, I am hoping and praying that xero will not only make a dent but also totally penetrate the US market- sharp increase in market share. Prayer is very powerful tool too. It can move mountains. Thank you all for your tremendous efforts. Great job!
I am looking forward to read the developments in the next 12 months.
Go Xero USA!

Just read a stuff article about how you ‘appeased’ investors with this result?! Not sure which investors they interviewed… I’ve paid off the mortgage, pumped cash into my own business and won’t sell any more shares for love nor money. I can only assume the journalist is on drugs.

Great results Xero, onwards and upwards. First time in my life I have have had non accounting clients get excited about their accounting program. To the point that I was asked to stop reconciling the bank because they enjoyed it too much!

@ Todd I am hoping and praying for the best – that the small and medium business will give Xero a fair go…
I am sure Xero is working very hard towards cracking the US Market. When it happens, it will be a big influence to the other countries to follow…